The Vegas Short Term Algorithm - page 3
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Today was the first real, full time trading day for the PAMM since I created it. Too bad I didn't have something else to do.
The day started out weird with that mystery 80 pip drop in 3 seconds in the Asian session. One dealer said it was a corporate order, and later another dealer said it was a hedge fund mistake. It sure felt like BOJ intervention, but dealers say the BOJ wasn't in the market.
I lost about 3.7% today. This is within the normal range of loss parameters when the algorithm loses money. Generally, your losses will average anywhere from 1% to maybe 5% [if you were aggressive]. I caught a few pips early, up near the high of the day on that crossover. But after that, crossovers did nothing but produce losses. Attached is the EUR/USD chart where the crossover produced all of my losses. I got long [with slippage because of the spike up] at the aqua arrow, and I exited the position at the white arrow [again with slippage on the downside]. This exacerbated things a bit, costing me a few pips.
The algorithm today just lost money - pure and simple. The 4 hour chart was bullish, and positions had to be long. Play the day over, and I wouldn't do anything different than today. This is the approximate 6% of the time that the algorithm loses.
Now, by design, losses should always be nominal. Like I said - anywhere from 1% to maybe 5% tops. Although I'm not happy the algorithm lost money, I did what I was supposed to do, and that is how I judge my performance.
Every algorithm loses money sometime. The key is keeping the losses manageable and relatively small. It's easy to make up a 3% loss; the same can't be said about 30% or greater.
Currently, we are at the 5th crossover in the last 3 - 4 weeks. This ties for the year the longest stretch of congestion we saw in the month of March. Going forward into the rest of the week, the Fed on Wednesday and NFP on Friday should create some volatility.
I have tried to stress the importance of knowing the weakness of not only my algorithm, but whatever you are using to trade. No matter how you trade, and whatever you want to call it, there is a weakness in there somewhere that leads to losses.
So, it's not back to the drawing board as I am sure some of you might think. I just picked some white marbles - whoop whoop. Tomorrows another day and I play the Marble Game again.
-vegas
Today was the first real, full time trading day for the PAMM since I created it. Too bad I didn't have something else to do. The day started out weird with that mystery 80 pip drop in 3 seconds in the Asian session. One dealer said it was a corporate order, and later another dealer said it was a hedge fund mistake. It sure felt like BOJ intervention, but dealers say the BOJ wasn't in the market. I lost about 3.7% today. This is within the normal range of loss parameters when the algorithm loses money. Generally, your losses will average anywhere from 1% to maybe 5% [if you were aggressive]. I caught a few pips early, up near the high of the day on that crossover. But after that, crossovers did nothing but produce losses. Attached is the EUR/USD chart where the crossover produced all of my losses. I got long [with slippage because of the spike up] at the aqua arrow, and I exited the position at the white arrow [again with slippage on the downside]. This exacerbated things a bit, costing me a few pips. The algorithm today just lost money - pure and simple. The 4 hour chart was bullish, and positions had to be long. Play the day over, and I wouldn't do anything different than today. This is the approximate 6% of the time that the algorithm loses. Now, by design, losses should always be nominal. Like I said - anywhere from 1% to maybe 5% tops. Although I'm not happy the algorithm lost money, I did what I was supposed to do, and that is how I judge my performance. Every algorithm loses money sometime. The key is keeping the losses manageable and relatively small. It's easy to make up a 3% loss; the same can't be said about 30% or greater. Currently, we are at the 5th crossover in the last 3 - 4 weeks. This ties for the year the longest stretch of congestion we saw in the month of March. Going forward into the rest of the week, the Fed on Wednesday and NFP on Friday should create some volatility. I have tried to stress the importance of knowing the weakness of not only my algorithm, but whatever you are using to trade. No matter how you trade, and whatever you want to call it, there is a weakness in there somewhere that leads to losses. So, it's not back to the drawing board as I am sure some of you might think. I just picked some white marbles - whoop whoop. Tomorrows another day and I play the Marble Game again.
Hi Vegas im using this short term in conjunction with the 1 hour tunnel, i also got stopped out on that trade, which is fine. The system kicked in nicely around 3:40 am gmt and the euro got into a nice trending mode I was tempted to take another trade this afternoon ny time but i think i will wait it out until midnight i normally lose during the asian session. The main enemy of this system is a non trending market the entry time is key you need to get in during the highest volume times but when a trend developes it could go on and on like what im seeing in euro right now. some things to consider. good stuff. Thanks.
enoc2g,
I am changing my attitude towards the Asian session. It is becoming a much more volatile affair, easily eclipsing the New York session which has become a metaphorical morgue.
I am going to take positions much earlier than I previously did; starting to trade within an hour or two of the open. Nothing frustrates me more than to see the Asian session have a 150 pip range; I'm sitting there doing nothing waiting for Europe to open; Europe opens and for the rest of the day you get a 50 pip stop hunt up and down; and then New York goes comatose for another 8 hours.
As I have stated many times; tight, low volatility ranges, especially in the 4 hour will present difficulties. And when you get Asia running, it is also frustrating to sit there and wait for a signal that never comes. That's why I'm going to start my trading day in Asia starting now.
In addition, it is frustrating to also go through weeks of straight up for 20-30 hours on the 4 hour, and then 20-30 hours straight down on the 4 hour; back and forth. And while this is happening, the ma's crossover a number of times, or sit on top of each other. So, while you are waiting for a short signal to get short, it screams up and you end up doing nothing. Of course, the opposite is also true.
Consider my trading day today. At the start, the 4 hour ma's are basically on top of each other. I'm figuring 1) with the days weakness and a failure up at the 1.40 level earlier, 2) Irish gov't bonds getting hammered and the CDS's at record levels, 3) a republican sweep that should, in theory, give some strength to the dollar, and finally 4) QE2 probably priced in to the Euro, that it might be a good idea to use the "short STA" to trade today.
I start about 2 hours before the European open, and from there it's straight up, with a couple of very short brief crossovers, that I'm not going to sell unless I can get some kind of confirmation it's a turn in the market. Well, it just keeps going up and I'm sitting here - finally, I have to admit this stuff isn't going lower today - but with a 140 - 160 range already, how much upside left is there before elections and FOMC?
And all of this is a direct result of a straight shot in Asia, with carry forward momentum. At least though, and this is very important, my cost here was only opportunity cost.
-vegas
Hi Vegas im using this short term in conjunction with the 1 hour tunnel, i also got stopped out on that trade, which is fine. The system kicked in nicely around 3:40 am gmt and the euro got into a nice trending mode I was tempted to take another trade this afternoon ny time but i think i will wait it out until midnight i normally lose during the asian session. The main enemy of this system is a non trending market the entry time is key you need to get in during the highest volume times but when a trend developes it could go on and on like what im seeing in euro right now. some things to consider. good stuff. Thanks.
enoc2g, I am changing my attitude towards the Asian session. It is becoming a much more volatile affair, easily eclipsing the New York session which has become a metaphorical morgue. I am going to take positions much earlier than I previously did; starting to trade within an hour or two of the open. Nothing frustrates me more than to see the Asian session have a 150 pip range; I'm sitting there doing nothing waiting for Europe to open; Europe opens and for the rest of the day you get a 50 pip stop hunt up and down; and then New York goes comatose for another 8 hours. As I have stated many times; tight, low volatility ranges, especially in the 4 hour will present difficulties. And when you get Asia running, it is also frustrating to sit there and wait for a signal that never comes. That's why I'm going to start my trading day in Asia starting now. In addition, it is frustrating to also go through weeks of straight up for 20-30 hours on the 4 hour, and then 20-30 hours straight down on the 4 hour; back and forth. And while this is happening, the ma's crossover a number of times, or sit on top of each other. So, while you are waiting for a short signal to get short, it screams up and you end up doing nothing. Of course, the opposite is also true. Consider my trading day today. At the start, the 4 hour ma's are basically on top of each other. I'm figuring 1) with the days weakness and a failure up at the 1.40 level earlier, 2) Irish gov't bonds getting hammered and the CDS's at record levels, 3) a republican sweep that should, in theory, give some strength to the dollar, and finally 4) QE2 probably priced in to the Euro, that it might be a good idea to use the "short STA" to trade today. I start about 2 hours before the European open, and from there it's straight up, with a couple of very short brief crossovers, that I'm not going to sell unless I can get some kind of confirmation it's a turn in the market. Well, it just keeps going up and I'm sitting here - finally, I have to admit this stuff isn't going lower today - but with a 140 - 160 range already, how much upside left is there before elections and FOMC? And all of this is a direct result of a straight shot in Asia, with carry forward momentum. At least though, and this is very important, my cost here was only opportunity cost. -vegas
Vegas your right, I m taking the same approach I find some really good moves can kick off during Asian session at times, and looking back you can get chopped up during any session so its really irrelevant. at the same time low volume in general is definitely the enemy need momentum to see follow through.
Either tomorrow or over the weekend I will be posting more examples to help clarify the algorithm.
For the last 3 - 4 days I have been fighting a nasty case of flu and am kind of "out of it". I've missed some trading but there is always more of that going forward. I'll be back with some posts late Friday or Saturday.
-vegas
It isn't to often that you get a triple confirmation of a short term top [time to take long profits], but Friday's action in silver saw just that. First upward aqua arrow is the buy signal; first red upward arrow is where the consecutive white dot counts for the long position; second upward red arrow is where white dot count above plum line starts; boxed downward arrow is where market hit exhaustion zone, red boxed downward arrow is where count ended for not only regular white dot count, but also white dot count above plum line.
Triple confirmation: 1) market hit aqua line, 2) regular white dot count ended at 30, where it was taken out, and 3) white dot count above plum line ended at 11, where it was taken out.
The first criteria should have been enough to get out, but if you were looking for other signals, the 2 white dot counts gave them to you.
-vegas
A typical day as of the last 4 weeks or so – all action in Asian session, crumbs for Europe and U.S. sessions. As I stated in an earlier post, this type of trading action is atypical and very difficult to deal with. In addition to that, it seems like we get 30-40 hours straight in one direction; then turns on a dime and goes 30-40 hours the other way. How many people you think got hurt the last 48 hours
4 Hour was bullish starting the day – I didn’t take the bait on the little run-up to the high early in Asian session. From there it was straight down to the aqua line, where we have basically been ± 30 pips or s
I got long once today, at 1.3961, as the yellow passed over the plum for the first time after the big drop [aqua arrow on attached chart]. If there was going to be a run up, here was the chance the market had. One thing I didn’t like at the time was the depth of the candlestick. From a major move, I don’t like to see very small candlesticks on the retracement: it means to me that it is only a dead-cat bounce. The problem is you get 5 or 6 of these and then – boom! – down 20 pips in about 1 minute. I therefore exited this trade quickly for a negligible gain; and sure enough about 15 minutes later that is exactly what happe
This is yet another example of why the algorithm is designed as it is. First do no harm, and then make money. It is frustrating to sit by and watch a nice counter move [to the 4 hour that is], but it is more painful to make stabs at bottom picking and end up with nothing but losses.
-vegas
P.S.
Too bad spot silver trades in 500 oz increments. Smaller increments would be nice. By the way, any correlation between silver taking off to the moon and all the lawsuits that allege fraud and manipulation from JP Morgan and HSBC? Ohhhhhhhh, I think so.
From today's action in the EURUSD, price hit the lower aqua line at the bottom. Nice cover of a short trade if you took it.
For those wondering why I didn't take it, read my blog today - I'm looking at the precious metals.
-vegas
Attached are 2 charts side-by-side in spot gold [XAUUSD] and AUDUSD. As gold was hitting new lows, I wanted to get long. However, the problem isn't being long as much as what can happen with my stop underneath the market.
I'm obviously trying to get a good long position, but it doesn't do me any good to get long and then be stopped out 60 seconds later with a stop fill $5/oz. lower than where my stop is. Risk here in the metals, when the head market manipulators JP Morgan and HSBC go for the stops, is horrendous. It's a fact of life you have to deal with when trading metals.
So, instead of getting long spot gold I bought AUDUSD. Now, as gold then rallied, AUD lagged. I'm not looking for gold to reverse and go to new highs, so I know after gold rallies $5 - $7 if AUD isn't going with it, probability wise I have to look at getting out of the trade. About 15 minutes after I opened position I got out. Basically a scratch [OK, I made 1 pip - whoop whoop - to me it's a scratch].
Now, I would have loved to make that $5 in gold, but the risk here is that I could have just as easily lost $9 or more. In AUD, my risk was with my tight stop. Big difference. Let me repeat - BIG DIFFERENCE.
I am more concerned with the risk than I am with whatever amount of money I make on the trade. As I have repeatedly told you, first do no harm, then make money. By severely cutting my risk in these type of trades, I know my losses will be small, but my gains when they correlate will be much, much larger.
-vegas
I don't have an example today. Instead, read my blog for my thoughts on the day.
-vegas